South korea: South Korea's central bank on Thursday cautioned against expectations for higher home prices that can stoke financial imbalances. The Bank of Korea (BOK) said in its report on financial stability that the Asian country maintained a stable financial system on the back of the sound resilience of financial institutions and the strong capacity of external payment.
According to Namibia Press Agency, the BOK noted concerns about financial imbalances amid expectations for higher housing prices in the Seoul metropolitan areas despite a slower expansion in household debts, affected by the government's efforts to curb the massive household debts. The new government of President Lee Jae-myung implemented measures to contain household debts and housing prices, including tighter lending regulations and plans to supply new homes.
The financial stress index, which gauges short-term financial instability, slightly fell to 16.5 in August, but the index stayed at a cautious range set between 12 and 24. Meanwhile, the financial vulnerability index, measuring long-term financial instability, increased to 32.6 at the end of June, nearing a long-term average of 33.8.
Housing prices in the greater Seoul areas gained 1.8 percent in August from a year earlier, while those in other areas excluding the metropolitan region declined 1.1 percent. In the capital Seoul, home prices jumped 4.8 percent in August on a yearly basis. The central bank left its benchmark interest rate unchanged at 2.50 percent for the second straight time last month amid lingering worries about expectations to purchase new homes with borrowed money, which offset growing demand for lower borrowing costs to bolster the sluggish economy.
The number of vulnerable debtors among households reached 1,383,000 at the end of June, with their debt totaling 99.9 trillion won (71.3 billion U.S. dollars), accounting for 7.0 percent of the total household debtors. Vulnerable debtors refer to multiple debtors with low income and low credit, who borrowed money from three or more financial institutions. Among the self-employed, the number of vulnerable debtors stood at 437,000 at the end of June, with their debt amounting to 130.2 trillion won (92.9 billion dollars). The proportion of vulnerable self-employed debtors to the total continued to rise since the second half of 2022 to hit 14.2 percent at the end of June.
The ratio of loans, at least one month overdue, for vulnerable household debtors came to 10.48 percent at the end of June, while the loan delinquency ratio for vulnerable self-employed debtors hit 11.34 percent. The ratios for both the household and self-employed debtors have been rising since the second half of 2022. The BOK stressed the need to improve the debt repayment capabilities of vulnerable borrowers through policy support for the self-employed people's income recovery, along with debt adjustments and interest burden relief.
As part of its supplementary budget plan, the government began to provide cash handouts to all people in July to bolster the sagging private consumption and support the self-employed.